Sunday, October 30, 2011

Markets: Have they given a breakout?

It was a news filled truncated Diwali week. Diwali is over and now is the time to look ahead. Lets try and see what possible road the market takes ahead.

1. The RBI policy as expected hiked rates by 25 basis points. The fine print was that Savings Bank Interest Rates have been de-regulated. This has potential to erode the profit margins especially of large private banks. Yes Bank immediately offered 6 pc Interest rates on Savings Account. This is a drag on the private sector banks.

2. Europe crisis has been averted by the Private Banks taking a 50 pc haircut on their loans. If it was Greece alone, then crisis would have been averted. What happens when Italy and Spain default. Politically it is a master stroke by China. They have agreed to give funds but the first losses would be borne by the European governments. China's role as a World power has gone up several notches. This development heralds the shift of political power towards Asia. Earlier, China was an economic power, now political influence follows.

3. Our markets have filled the gap at 5350 - 5215 and this was broken by a gap up. This is also known as Island reversal provided there is follow up buying. We now run into a wall of resistances around 5400 - 5500 with 5470 being a key resistance on multiple parameters.

4. The crisis has not been solved, its only delayed. 5450-5500 also represents the trend line joining the tops from 6339. This should be taken out on a weekly basis, to herald a fresh bull market.

To Summarize, we are in a powerful bear market rally. Only a close above 5500 on a sustainable basis would foretell a fresh bull market. We are just 150 points away from a breakout. We wait and we watch on the sidelines.

For those interested in Stocks Picks and Gold, Lakshmi has her Investment Cherry Picks and Gold Rush on offer.

Wednesday, October 26, 2011

Diwali Musings

Today on the day of a new Mahurat it is time to take stock. In the last 1 year, the markets have gone down about 16 pc. What does the road ahead hold for us?

1. Now is the time to start building your portfolio gradually. Think with a horizon of 5-10 years and look for companies which will power the new economy, the new world order.

2. Once identified, start adding in installments. Every 200 points lower on Nifty say add 10 pc.

3. Look at locking in NCDs and fixed income instruments at the current high rates of interest.

4. Buy Gold strictly in dips or on breakout above previous highs.

Its important to come up with a financial plan and follow it to closure.

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For those interested in Stock Picks and Gold, do check out Lakshmi's offer. She may offer financial planning services on a selective basis too. Those interested can get in touch with her.

Sunday, October 23, 2011

Markets: The Week Ahead

It is a crucial week for the markets with the expiry on Tuesday and a curtailed trading week. TO complicate matters we have the RBI policy to boot on Tuesday. Let us see what the markets have to offer.

1. Expiry on Tuesday and RBI Credit policy on same day is potentially explosive cocktail. RBI should hike rates by 25 basis points. Anything less or more could trigger about 100 point moves on the Nifty.

2. The resistance of 5170 has held for 3 attempts now. Either we break it in the move or we tank to to test 4720. Above 5230, we can re-test the 5350-5400 zone.

3. If money is pumped in for Euro crisis and Greek gets a bailout, expect dollar index to go up, commodities to crash and gold to weaken in the short term.

4. One can look at investing in the Infrastructure Bonds of PFC covered in an earlier post.

5. The results are coming in and nothing spectacular to write home so far. The good results will be out and the ones declared later are usually nothing to write home about.

6. Infrastructure companies are bearing the brunt of the slowdown, like HCC and L&T.

I expect the markets to trade in a range in this truncated week. Have a safe, happy and prosperous Diwali.

Those interested in a package of Gold and Equity Picks investments can look at what Lakshmi has to offer.
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Thursday, October 20, 2011

Should one invest in Infrastructure Bonds

The season for tax saving is still some time away but it always pays to start soon. Infrastructure bonds is a new tax savings category introduced last year. Lets have a look at it. I had written a guest post for Subhankar's blog. It is accessible at:
Power Finance Infrastructure Bonds Review

Sunday, October 16, 2011

Markets: The Week Ahead

It was a rally on D-Street and the Nifty rallied about 5 pc to close the week at 5132. What will the coming week bring ahead. Will the rally continue or will it sputter. Let us try and find out.

1. The October Settlement is a truncated one. The expiry is happening on Tuesday, Oct 25th thanks to Diwali. This gives us about 7 sessions to expiry.

2. The RBI credit policy falls on Oct 25th. So, we will have action packed expiry this time. It will be like a lottery as a 100 point swings can happen.

3. The inflation is still not under control. I expect a 25 basis points hike the this policy meet.Interesting thing is that bond yields have moved significantly higher in the 8.7 - 8.8 pc band. This also implies that government borrowing is taking bond yields higher. Macros suggest a high interest regime to continue.

4. There are a slew of corporate results coming in this week. Usually the early results are the good ones. Reliance just about met expectations thanks to high refining margins,Infosys benefited from a weak rupee. The poorer results should come from the Banks (Treasury losses), Autos (poor sales) and Infrastructure companies.

5. The Nifty is moving towards the critical resistance of 5169 again. It has failed to move in past 2 attempts. After this we have the gaps from 5229 - 5331 to be closed. We are headed towards a cluster of resistances and it should be interesting to watch how the Nifty behaves at slightly higher levels.

6. This could be the 4th wave of C-3. refer earlier posts for exact wave counts. This wave can typically go up to 5350-5400 and then we have the last wave down which can last for 4 months.

7. The layoffs have started in financial institutions. The Petrol prices may be hiked again if the crude prices go up coupled with a weak rupee.

Do look at investing Infrastructure Bonds for tax savings. More in my guest post in Subhankar blog.

Tough times ahead and time to brace up.

Lakshmi has come up with a presentation on Gold to go with Equity Picks. I have helped her prepare both.
I am enclosing the link to her offer. I feel its a very attractive offer.
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Thursday, October 6, 2011

Double Top

We hit the tops at 6357 in January 2008 and 6339 in November 2010. The support levels cam at around 5100 which have decisively broken giving a target of 3700 to 3900 range.
Time elapsed between 2 peaks is 32 months, so it may be another 32 months from November 2010, which comes to June 2013 that we cross 6350 again. It could also mean the Bear Market could last 32 months out of which 11 months have elapsed. This is same scenario as 1992-2000 where the market was stuck in a range.

For those interested in stock picking in the downturn, I am enclosing the link of Lakshmi.

She has come up with the updates for the month of October 2011. I have helped in identifying the stocks on the basis of fundamentals.

Investment Cherry Picks for the downturn

Sunday, October 2, 2011

Where does one hide now?

The last quarter has been bad for the equity markets. The Government borrowing is going through the roof and Gold prices are declining. What does an Investor do next? Lets try and work out the best investment avenues.

1. The Goverment has ended borrowing about 66 pc of their full year target in the first 6 months. This means in H2, they will borrow more. This means Rates will go up and Bonds yields have risen. Gilt funds will still have to wait for sometime or one can do a SIP in Gilt funds. Interest Rates are yet to peak out.

2. The US Dollar is strengthening due to safe haven status. This means all other currencies will weaken against the Dollar. The rupee may go down further and all commodities including Gold can correct 10 pc more. So, buying Gold doesnt make too much sense right now.

3. The Equity markets have been going down. There is fear and panic everywhere. Support levels are 4538, 4300, 4000 and 3700. One can start adding near each support level about 20 pc quantity.

4. Other Option is to invest in liquid funds or stay in cash. The inflation will eat away the value of Cash and liquid funds may give up 7-8 pc.

5. In the long term, if India has to do well, then the Equity markets have to do well. As Warren Buffet says, when markets fall the environment is so bad that no one ends up buying anything. Now is the time to build the future and start investing for the next 5 year horizon. SIP in Stocks which are of good quality.

The Nifty has support around 4900, 4840, 4720 and then 4538. upside resistance is the band of 5030 and a cluster of resistances around 5100 and 5200. Fresh shorts below 4840 and longs above 5169.

For those interested in stock picking in the downturn, I am enclosing the link of Lakshmi.

She has come up with the updates for the month of October 2011. I have helped in identifying the stocks on the basis of fundamentals.

Investment Cherry Picks